AMER al-Barkoni, aged six, was hunting for bullets yesterday on a large expanse of empty ground in the centre of Gaza City. A month ago the Israeli army had a large camp here. But now the soldiers have gone, leaving a sandy playground littered with odd ammunition. For Gazans the dismantling of this camp is a sign that Israel is serious about peace.

Not far away, however, a neighbourhood was yesterday mourning the death of a leader, and the streets were filled with the smoke of burning tyres. Ahmed abu Ib'Tahan was shot dead, along with five others, by Israeli undercover soldiers on Monday.

None was wanted by the Israelis and all were supporters of the peace agreement and followers of Fatah, the mainstream faction of the Palestine Liberation Organisation. Just two hours before he was killed, Ib'Tahan had been drinking coffee with an Israeli administrator in Gaza, discussing the timetable for withdrawal. For Gazans these latest killings are a sign that Israel still wants war.

'These men were committed to the peace process. They were highly respected and were working to help implement the agreement,' said Diah al-Louh, the PLO spokesman in Gaza yesterday, as another Palestinian was shot dead in a new surge of violence. Six months after the signing of the September peace agreement, nobody knows what to make of the mixed messages coming from Israel.

On the one hand, there are the reasons for optimism. Withdrawal has clearly begun, with some reports saying the 70 per cent of the military have now been pulled back from centres of Arab population in Gaza. Not only has the central Gaza camp been dismantled, but large quantities of heavy equipment have been removed from the military administration headquarters in the city.

Ansar 11, the main Israeli prison, no longer holds long- term prisoners. New bases have been established around the Gaza settlement area, where the Israeli military will remain until the final status of the lands is decided.

Israel has allowed Fatah activists, mostly ex-prisoners, to start building a political power-base in the occupied territories, ready for the return of Yasser Arafat, chairman of the PLO.

A new PLO police station was being made ready yesterday for the arrival of the Palestinian police force.

At the same time Israeli politicians have been demonstrating their peace credentials by pressing Mr Arafat to return to the negotiations, which were halted after the Hebron massacre, promising swift implementation of the Gaza-Jericho accords.

Meanwhile, however, despite the pull-back in Gaza, the army's street presence is as obtrusive as ever. Provocative patrols continue daily and arrests and harassment, particularly by undercover units, are unabated, undermining support for the negotiations that the political leadership wishes to promote.

The Fatah activists killed on Monday were part of Mr Arafat's new security apparatus, responsible for policing the Palestinian streets and enforcing the PLO's ceasefire with the Israeli army. Their deaths, on the eve of a highly sensitive new round of Israeli- PLO talks, could not have been better timed to sabotage the negotiations.

In fact, Mr Arafat held the line, and the PLO-Israel meeting did take place yesterday, although little progress was reported and the atmosphere, still hostile as a result of the Hebron massacre, was further soured. Nabil Shaath, the PLO negotiator, condemned the Gaza killings as 'cold-blooded murder'.